Josip Saša Marenjak1, Diana Car-Pušić2, Ivan Marović2 Involving Stakeholders in Risk Allocation of Public Investment Projects Saša Marenjak1, Diana Car-Pušić2, Ivan Marović2 1University of Osijek, Faculty of Civil Engineering (GFOS) 2University of Rijeka, Faculty of Civil Engineering (GFRI) Croatia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia Introduction Managing public investment projects – a complex business process (public administration and social community) Public administration needs to identify the one common or compromise interest of the entire community within the pluralism of individual interest of particular group Every wrong decision can cause long-term disaster Proactive stakeholder management Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia Introduction Public-private partnership (PPP) can have its advantages over the classical public financed projects Primarily related to covering financing costs as well as operational and maintenance risks Facilities constructed according to PPP model GB > 830 projects / € 78 billion total capital value CAN ≈190 projects of € 50 billion total capital value Croatia and other post-transition countries (gathering first experiences) Past experience in public project implementation in Croatia has shown freq. occurrence of risks in contracting, design and construction stages poorly defined project task, incomplete project documentation, unrealistic price and construction schedule, etc. Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia Josip Problems studied Research objective To give an answer how opinions of public investment project stakeholders can influence the risks and project success Special emphasis At the importance of involving all stakeholders in decision making process of public investment projects in order to allocate risks and reduce the costs of negative events To achieve higher Value for Money (VfM) Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Theoretical research framework PPP is defined as: “contractual agreement between public and private parties, in which both parties will receive significant benefits, whereby the private party perform some public function on behalf of the public party for a specified time and within a negotiated framework of transferred risk and outcome-based financial rewards” (USAID Regional Infrastructure Program 2002) PPP strengths A swifter implementation, Reduced WLCC, A better risk allocation, A higher-quality service, More effective management, … PPP essence – financial engagement (private sector) and risk allocation among public and private partners Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Theoretical research framework For success of a project it is important: To foresee the risks related to certain components and phases of the project To allocate them so that the balance ensures the best value for invested resources To manage stakeholders in order to understand their expectations and thereby increase their positive input and maximize the project value Stakeholder: “a person or organization that can affect, be affected by, or perceive themselves to be affected by a decision or activity” (ISO Guide 73:2009) Proactive stakeholder mgmt. Proactive risk mgmt. Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Theoretical research framework To deal with such decision making problems in such complex environments a various multi-criteria group decision-making method have (MGDM) been developed: AHP PROMETHEE AHP+PROMETHEE MGDM’s enabled stakeholders to be involved in medias res Especially important for end-users of PPP projects Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia Research methodology Experiences of public facilities implemented in the Republic of Croatia Legal and other documents significant to the PPP model in the Republic of Croatia Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Research methodology Experiences of public facilities implemented in the Republic of Croatia Numerous problems are occurring in the project preparation stage, implementation stage, and utilization stage Technical and public structure quality standards are not matched Public developer generally doesn’t entrust project management to professionals No pre-investment studies – no project optimization … Design engineer is selected through public tender by the lowest-price criterion Design contract doesn’t realistically set time and/or price Short terms related to the “time- delivery” … Facility routine maintenance costs are higher than expected Energy costs are higher than expected Necessary interventions on the facilities are required during defects liability period … Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia General framework for involving stakeholders in optimal risk allocation of public investment projects Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Moving Beyond Risks: Organising for Resilience |Bled, Slovenia Conclusion During success evaluation of PPP and PFI project, public partner needs: To implement different risk allocation model To take into account various criteria General framework for involving stakeholders in optimal risk allocation of public investment projects is presented Further research: to identify more suitable stakeholder involvement (early in projects development phase) in order to define appropriate risk allocation structure reduction of negative consequences and higher VfM Value for Money Moving Beyond Risks: Organising for Resilience |Bled, Slovenia

Thank you for your attention This work has been fully supported by the University of Rijeka under the project number 13.05.1.3.10.